Include deposit-taking NBFCs in co-origination model: FIDC to RBI

• The Finance Industry Development Council (FIDC) has pitched for the inclusion of deposit-taking NBFCs in the co-origination model proposed by the RBI.

• All NBFCs with an asset base of over Rs 500 crore should be allowed in this model, said Raman Aggarwal, Chairman, FIDC.

FIDC sees no logic

• FIDC is a self-regulatory body for asset-financing. “FIDC welcomes the RBI’s initiative towards co-origination of loans by banks and NBFCs. However, we do not see any logic in restricting it to only non-deposit taking NBFCs.”

• He said that the prevailing regulatory framework of the RBI is the same for both deposit-taking and non-deposit taking systemically important (having asset base of Rs 500 crore and above) NBFCs.

• “We have requested the RBI to consider allowing all NBFCs with an asset base of Rs 500 crore and above to participate in co-origination. This will give a big boost to this model as deposit-taking NBFCs have very large customer bases who would fit in the definition of priority sector.”

RBI Guidelines

• The RBI is expected to issue the guidelines on co-origination of priority sector loans by end-September 2018.

• The RBI in a bid to give a leg-up to priority sector lending said all scheduled commercial banks would be allowed to co-originate loans with non-banking financial companies (NBFCs) for creating eligible priority sector assets.

RRBs, SFBs excluded

• However, the RBI has excluded RRBs and Small Finance Banks from co-origination, as most of the loans they originate are priority sector loans.

• Further, only NBFCs classified as non-deposit taking systemically-important can get into co-origination arrangements with scheduled commercial banks.

• The central bank has said that the co-origination arrangement should entail joint contribution of credit by both lenders at the facility-level. It should also involve the sharing of risks and rewards between the banks and the NBFCs for ensuring appropriate alignment of respective business objectives as per their mutual agreement.